Core Viewpoint - The traditional coal-fired power industry is undergoing significant transformation, shifting from a cyclical asset to a stable value asset due to changes in energy structure and market reforms [1][2]. Industry Transformation - The coal-fired power sector has transitioned from being a "power provider" to a "regulatory guarantor," with its role evolving to include peak supply and frequency regulation in response to the instability of renewable energy sources [1][2]. - The installed capacity of coal-fired power has decreased from 66% in 2015 to 40% by July 2025, while its generation share has dropped from 74% to 65% [1]. New Profitability Framework - The profitability of coal-fired power is now influenced by three main factors: rising capacity prices, increasing auxiliary service revenues, and the gradual improvement of the coal-electricity linkage mechanism [2][3]. - The capacity price mechanism, effective from 2024, will provide fixed compensation based on installed capacity, with expected prices rising from 100 yuan/kW·year in 2024-2025 to 165 yuan/kW·year in 2026, and up to 230 yuan/kW·year in leading provinces [2]. - Auxiliary service revenues are projected to grow significantly, with Huaneng International's net income from auxiliary services expected to rise from 1.473 billion yuan in 2022 to 2.458 billion yuan in 2024 [3]. Market Dynamics - The shift towards market-based trading has reduced the influence of traditional pricing factors, allowing coal-fired power companies to optimize pricing strategies and enhance revenue per unit of electricity generated [2][3]. - The marketization of pricing mechanisms has effectively smoothed out cost fluctuations, leading to a more stable return on equity (ROE) for coal-fired power plants, projected to stabilize around 10% [3]. Financial Performance and Outlook - The coal-fired power sector is experiencing improved financial metrics, with a projected 8.2% growth in equity for 2023-2024 and a further 3.5% increase in the first half of 2025 [4][5]. - Operating cash flow for the coal-fired power sector is expected to reach 144 billion yuan in the first half of 2025, reflecting a year-on-year increase of 29.4% [5]. - The sector's dividend payouts are also on the rise, with a 91% year-on-year increase in total dividends in the first half of 2025, indicating a sustainable dividend capacity [5]. Investment Recommendations - Investors are advised to focus on three main lines of opportunity within the coal-fired power sector: leading companies with improving performance, firms committed to high dividends, and regionally stable leaders [5].

Company Performance - Baoneng New Energy (000690.SZ) expects a net profit of 520 million to 580 million yuan for the first half of 2025, representing a year-on-year growth of 42.08% to 58.48% [1] - The significant profit increase is attributed to a rise in electricity consumption in Guangdong province and a decrease in operating costs due to falling coal prices [1] Industry Trends - Guangdong's electricity load has reached a record high of 15,974 MW, a 1.94% increase compared to the highest load in 2024, driven by high temperatures [1] - The ongoing high electricity demand during peak summer is creating structural investment opportunities in the power sector, particularly benefiting thermal power companies [1] - The coal market remains relaxed, with national power plant inventories at approximately 210 million tons, sufficient for about 35 days of power generation [2] - The average price of coal in Shandong has decreased by 184.37 yuan/ton, a drop of 22.94% compared to the same period in 2024, which has reduced operating costs for thermal power companies [2] Market Dynamics - The electricity industry is undergoing significant changes driven by market reforms, with a shift from traditional generation models to a "generation + regulation" service model [3] - As investment in renewable energy slows, the utilization hours for thermal power are expected to stabilize, leading to a revaluation of the industry's worth [3] - Baoneng New Energy is positioned to benefit from these industry trends, being a key player in Guangdong's electricity supply and utilizing advanced clean combustion technology [3] Capital Market Response - The improving profitability trend in the thermal power sector has been recognized by the market, with the Shenwan thermal power sector index rising over 20% in the past three months [4] - Baoneng New Energy has shown stable growth, reflecting market confidence in the thermal power industry [4] - The ongoing peak summer demand is expected to sustain the positive momentum in the thermal power sector, attracting more investor interest [4]